3 Ways Older Adults Can Improve Their Student Loan Debt Fiasco

by Jessica Sommerfield · 2 comments

When we hear about the increasing weight of student loan debt, we tend to assume it applies mostly to college-age young adults – and it does. But, there’s another group whose amount of student loan debt is growing at an alarming rate: seniors.

A recent FICO report shows that the percentage of adults over the age of 65 with student loans increased 300% in the last 10 years. Individually, Americans over 65 owe an average of $28,268, with those 55 to 64 owing an even higher average of $33,915. One explanation for this jump is the trend of older adults going back to college to prepare for new career paths, and the other is the growing number of parents and grandparents who are co-signing for their children’s loans.

Regardless of how seniors are taking on student debt, it’s worse for them than it is for young adults, who are likely to improve their earnings and ability to repay loans over the next several decades. For most retired adults over 65, Social Security benefits are the only source of income. And, while government benefits are normally protected from wage garnishment, student loans are the exception. This means many debt-laden seniors are finding themselves with fixed incomes that are getting even smaller.

Different groups are working to change some of these rules that affect seniors negatively, but, meanwhile, there are at least three strategies that can help.

1. Negotiate Lower Payments

Recent changes to student loan repayment programs makes it possible for some seniors to declare their financial difficulty and qualify for a more manageable schedule. Income-based repayment is the first option, but a senior’s loans must be from their own education expenses (not a child’s). The loans can’t be in default either. If a senior qualifies for this plan, their payment cannot exceed more than 15% of their income.

There are also other options for those who don’t qualify for income-based repayment. For instance, they could consolidate their delinquent loans into the Direct Loan program and qualify for an income-contingent plan. Finally, an income-sensitive plan can help seniors keep their payment between 4 and 25% of their income (although it can only be used for 5 years).

These payment options are just for federal loans, not private loans. With private loans, seniors may be able to work directly with their lender to consolidate or refinance and achieve a more affordable payment. Because there are so many rules and implications for seniors’ delicate financial security, it’s best to talk to a credit counselor for personalized advice.

2. Consider Taking Out Life Insurance

With the amount of debt today’s young adults are carrying, financial advisors seriously suggest they get life insurance. While standard federal loans and even PLUS loans are frequently forgiven if a student or their responsible parent passes away (minus income taxes on the forgiven amount), private loans might not be – and sometimes they’re due immediately, and in full.

Since they’re relatively inexpensive, life insurance policies aren’t a bad idea for young adults with student debt, let alone seniors. Rates and terms will vary, but financial experts advise getting a longer/larger policy versus several smaller ones, and one that’s big enough to cover the full debt repayment.

3. Apply for a Disability Discharge

Another way seniors may be able to negotiate lower payments or receive complete student debt forgiveness for federal loans is with a qualifying disability. The rules are supposedly complex, but the potential benefit is worth looking into with the help of a financial advisor.

Seniors facing student loan debt is a serious problem, and it’s no easy fix. These tips, however, can help seniors keep their payments manageable and help them enjoy a more comfortable style of living.

Do you have student loan debt? How are you actively reducing that debt?

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  • Luis says:

    My son already graduated from High School this year. He’s already enrolled in a college near our home, study a certificate in Auto Mechanic. The cost for the certificate (one year of duration) is $28,000 aprox. He applied for the FASFA and they approved only from $5,000 to $6,000 for the whole period. Now, the rest of the debt, is divided into two student loans. One for him when he finish in a year, and the other one for me, starting to pay in a year from now. The fun part is that I already paid my student loan in full from my studies. I am 46.

  • Myfinancekits says:

    Many factors are responsible to the rise of student loans in America today. One, the school fees are very high. That is why you hardly see people who will not take student loans to complete his education. Two, people are just living from paychecks to paychecks. Salaries can no longer take people home. This makes it difficult for borrowers to quickly pay down their loans.
    Thanks you for the advice you gave in this your article. It will definitely help some people out there.

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